OREANDA-NEWS. September 12, 2011. Moldovan National Bank Governor Dorin Dragutanu's interview with the MOLDPRES news agency:

MOLDPRES: Mr. Governor, to what extent the recent attempts to misappropriate stocks in four Moldovan banks affect the banks' clients?

Dragutanu: First of all, it should be said that some companies, some of which are offshore companies, tried to illegally dispossess lawful holders of their stocks via dubious transactions. There is one question arousing: why was this done via offshore companies? Because somebody wants to conceal by all means possible those who are behind these transactions.

The authorities put it clear: we want to halt these dubious deals and they did it; we want to reinstate, and we committed before our foreign partners to reinstate the legal stockholders in their rights, and we want to take measures so that as few dubious transactions as possible appear in the future and that there should be little probability that they reappear in the future, and to make sure that if somebody violates the law, they will be easily disclosed and called to account.

In fact, it is about problems between stockholders, those who lost and those who took over or try to take over stocks. Taking into account the fact that these transactions took place without being approved in written form by the National Bank (BNM) beforehand, the right to vote of these stockholders is suspended.

No matter who is behind these transactions, their rights to vote are suspended. This means that given what and how the ill-intentioned stockholders did, they cannot influence the banks' decisions or change their leadership. There is no way for them to influence the way of approaching risks, the mechanism for working with the clients and managing loans and deposits. This is a problem which does not affect the banks' daily transactions. And we have said that the National Bank will not authorize the alleged stockholders until the authorities complete the official investigations, until the case goes the whole judicial way and until light is shed on it. As a matter of fact, they took some papers on the basis of which they cannot have any influence on the banks. Meanwhile, the justice should enforce the law.

Until the situation in clarified, the banks continue their operations on the basis of business plans and policies approved by the other legal stockholders and implemented by their present leadership. The important thing is that the current leadership takes care that the banks be solvent andhave liquidity. Nothing of what is going on endangers the management of these banks.

MOLDPRES: What was the National Bank's reaction to the raider attacks?

Dragutanu: The right of the National Bank of Moldova to intervene in such cases is stipulated in Article 145 of the law on financial institutions. As soon as I learnt about these transactions and attempts to attack the concerned banks, I issued decisions concerning the suspension of the right to vote of these stocks.

MOLDPRES: Is this the only measure that the BNM can resort to that is provided in the legislation in force?

Dragutanu: The only thing that we can do until the situation is cleared up is to suspend the right to vote of these stocks. The BNM reacted swiftly. In this case no new stockholder can affect the bank's decisions. We had a very close cooperation with the lawyers of the stockholders who incurred damages. There was a string of interpellations from lawyers, and we quickly intervened to help them prepare the defence strategy.

MOLDPRES: Four banks were attacked. Yet, it seems that this fact had no impact on the evolution of the banking system on the whole.

Dragutanu: I will give you just some figures. The deposits increased by 18 per cent over the last 12 months since late last August, and the loans went up by 14 per cent over the last 12 months, with both indexes being higher than the results for 2010. In August 2011, the deposits rose by 272 million lei, or by one per cent against 31 July. In late last August, the banks' liquidity was more than comfortable, as it stayed at the level recorded in late July 2011 - 32 per cent (the minimal level demanded by the BNM is 20 per cent). In the first eight months of 2011, the banks' profits were higher than in the same period of 2010. The problems that we are speaking about emerged only in late last July. Hence, the banks worked as normal in August, which can be noticed at present as well.

MOLDPRES: In this case, what is the reason for the concerns about these transactions which are seen as fraudulent?

Dragutanu: The legal stockholders must be protected and reinstated in their rights. We cannot speak about economic growth in Moldova if the investors and the private property are not protected, if lawless actions and dubious transactions during which the legal owners lose their wealth are not ruled out. This is a bomb planted under the economic growth in the long run. How is it possible to attract foreign investments which we need so much, if potential investors see that they practically enter a twilight region, where one may lose one's investments via court rulings? When the foreign partners see what is going on here, to what extent will they trust you when you tell them that you want to implement reforms, to enhance people's well-being and to ensure the economic growth and establish democracy? This is the biggest problem, not the banks' operation.
And this is what I actually wanted to say; life goes on, the banks work absolutely as normal, better than the year before. Nonetheless, we should cast light and fully clarify what happened, reinstate the legal stockholders in their rights, identify those who infringed the law and punish them.

MOLDPRES: To what extent the legislative amendments operated after the government assumed responsibility for them will be able to protect the stockholders from similar cases in the future?

Dragutanu: A string of legislative acts were amended after the government had assumed responsibility. Their goal is to prevent such transactions in the future, and in case they happen, to identify the people who violated the law and call them to account much easier. Other amendments are aimed at changing the civil procedure code, and removing Article 275, which gives the courts an excessive margin of discretion when ordering the immediate execution of their rulings. To be executed, a decision must be final and irrevocable.

Article 15 of the law on financial institutions was amended. If a transaction with a significant quota of stocks in a bank is carried out without the written permission of the National Bank, this transaction is null. Now, it will be much more difficult to make transactions without the National Bank's knowledge. Finally, we are the ones to say whether somebody has the right and is able to correctly manage a bank and whether this private person or legal entity is solvent. The law on financial institutions clearly stipulates the cases when the banks' capital quota shall be transferred exclusively with a preliminary written permission of the National Bank. The non-observance of these requirements entails absolute nullity of such transactions.

And also, the amendment to the law on stocks and shares and the law on the National Financial Market Commission stipulates that, when a transaction with a significant quota is made in a bank, the first thing which the register, broker, national depositor, other people from the Stock Exchange should ask is whether there is a written authorization of the National Bank. If there is one, the transaction is carried out, if no authorization was issued, it means that the transaction is already null; this means that all the people who operate changes and registrations in the stockholders' register act illegally.

MOLDPRES: When you speak about the National Bank's authorization, do you mean a signature by the governor or a collective decision?

Dragutanu: The National Bank has a division in charge of authorizing banks and stockholders. The work is carried out in line with standards applied all over the world, on the basis of principles accepted by the European Union, in order to check whether the future stockholders meet the conditions imposed by the National Bank and whether the latter is sure that the new stockholder has the capacity to manage the bank accurately and prudently. This is the meaning of the procedure. The authorization is issued and can be signed only by the members of the Management Board. In our case, by the governor and two deputy governors of the National Bank. Nobody else can issue authorizations.